JPMorgan, one of the largest financial institutions in the world, believes that the arrival of the next Ethereum update, dubbed Shanghai, will bring more investors to invest their funds in the protocol. The firm estimates that number could reach 60% of ether issued, a number already staked in other blockchain networks.
JPMorgan expects Ethereum Shanghai upgrade to bring more funds to the network
A recent report from JPMorgan found that Shanghai’s upcoming upgrade, which is expected to go live in March, could bring more capital to the network. The investment bank estimates that Shanghai will bring Ethereum’s stake percentage to the number of other popular proof-of-stake networks, more than four times the currently staked ether.
The report explain:
Assuming the staking rate converges over time to the 60% average of other large networks, the number of validators could increase from $0.5 million to $2.2 million and the annual yield in ETH would drop from 7.4% today to around 5%.
14% of Ether issuance is currently staked and cannot be withdrawn until the Shanghai update is finally applied. Other protocols, like Solana and Cardano, have around 70% of their emissions staked, according to data staking rewards.
New Staking Trends
JPMorgan also clarified the fate of these new funds that they believe new investors will stake. The firm estimates that most of these funds will go to platforms such as Poolwhich have several advantages over the maintenance of the physical infrastructure.
The report states that these platforms “give liquidity to staking assets that would otherwise be locked into staking contracts by providing an equal amount of derivative token in exchange for ETHwhich can be exchanged.
As the report suggests, these derivative tokens can also be positioned on different decentralized finance platforms to generate revenue by staking them as well. Additionally, they make it easy to circumvent the staking requirement of at least 32 ethers, allowing smaller investors to participate in protocol validation tasks in staking pools as well.
Exchanges like Coinbase and Kraken also offer staking services for Ethereum, but regulatory headwinds could thwart these services in the US. Kraken recently shut down its staking programs in the United States and was fined $30 million by the SEC to settle charges of offering unregistered staking services. However, users from foreign countries will also be able to stake their Ethereum tokens using these services.
This new configuration of the staking panorama could lead to an even higher concentration of funds in fewer hands, which raises concerns about the resilience of these platforms against attacks in the future.
What do you think of JPMrogan’s Ethereum staking predictions? Tell us in the comments section below.
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